Why Do the Values of ADRs Closely Track the Values

question 5

Multiple Choice

Why do the values of ADRs closely track the values of the underlying stock?

• A)If there is a discrepancy between the value of ADRs and the values of the underlying stock,arbitragers will quickly cause the values to converge.
• B)The only way to value ADRs is in relation to the values of the underlying stock.
• C)ADRs have no value except in relation to the underlying stock.
• D)Investors will not allow discrepancies between the values of ADRs and the values of underlying stock.

---

Definitions:

Disbursements

Money paid out by a business or organization for various purposes, including expenses, investments, and dividends.

Average Daily Receipts

The average amount of cash that a business receives on a daily basis, calculated over a specific period.

Cheques

Written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer or a designated party.

Clearing Times

The time period it takes for a financial transaction to be processed and settled.